Indian Textile Trade – Prevention of Unfair Competition

Textile Trade – Prevention of Unfair Competition
Ms Neha Garg
Research Scholar
Punjab Agricultural University, Ludhiana, India




Indian textile industry, one of the major industries in the country, has a significant presence in the Indian economy as well as in the International scenario. Clothing is one of the basic needs of the mankind and has a major contribution to make not only in the industrial production scenario but also in generating ample employment opportunities and earning crucial foreign exchange for the country.

The Indian textile industry also makes a major contribution to the production of textile fibres and yarns all over the world. If we look at the world scenario of textile production , India is the biggest producer of jute, for the production of silk , it holds the second position and is the third largest producer of cotton and cellulosic fibre. For the production of synthetic textiles, the country holds the fifth position. The industry holds a very high potential for generation of employment for the work force of the country as it is very closely related to a major employment sector of agriculture due to large scale production of natural fibers.At present , the contribution by textiles and apparel sector to India’s GDPis approximately 4 percent while the sector holds the privilege of contributing approximately 14 percent the industrial production. The contribution to manufacturing sector stands at 26 per cent while the contribution to country's total export earnings is estimated as 15.9 per cent. The sector holds the credit for being responsible for 18 percent of the industrial employment. The major segments of the Indian textile industry are man-made textiles, cotton textiles including Handlooms, Silk , Woollens, Coir Jute and Readymade Garments.

The apparel and textile industry is not only catering to the huge domestic demand but is also contributing a lot to the foreign exchange generation by contributing to the export market. The industry export apparels to European countries specially France and Spain, Middle East countries and a major chunk of foreign exchange comes from the export to USA. The Indian industry has been exporting almost 4 % of the textile products coming in US and in terms of export turnover US is a major market for the Indian exporters on which the stability of industry depends. A lot of manufacturers have gone for major capacity expansions in the last four to five years due to various initiatives taken by the government for promoting technology up gradation. Afterwards a recession in US had a very negative impact on the manufacturing situation .The industry has been using a whole range of computer software for various purpose like data management to production control as well as communication.

Wide usage of pirated software for these services by Indian textile sector is a major cause of concern for the US based manufacturers as in a competitive marketing environment, usage of pirated software gives a very clear cost advantage to these manufacturers in comparison to those who are genuinely paying the correct price for using the desired software . As a result, certain states in US have re-evaluated anti-piracy and unfair trade practice legislation, and the early results are potentially leading to the imposition of sanctions on those companies that are found to have stolen or misappropriated proprietary information technology. The major parties who are behind such proposals are of firm view that the companies who are using pirated software have a clear cost advantage in comparison to companies who are using genuine software and this advantage should come under the criteria of unfair competition. The Washington Unfair competition law has been revised to include the potential for liability not only for the companies that misuse legal IT and take advantage of it while manufacturing their products , which can be termed as direct violators, but also has provisions for the companies that are responsible to create such liability for third parties that contract with foreign manufacturers who utilize misappropriated proprietary .However, the threshold value for a claim is low. The value of the Information Technology at issue must be greater than US$20,000.Moreover, the plaintiff should be a competitor of the direct violator that manufactures products that are in direct competition with the products alleged to have used misappropriated IT and it is also important that the plaintiff does not itself use misappropriated IT, and the plaintiff sells its competing products in Washington State.

The first case that has come into notice belongs to Pratibha Syntex Ltd in which a lawsuit has been filed against the company for gaining an unfair competitive advantage over American companies by using pirated software in the production of clothing imported and sold in California. If the company is found liable, the lawsuit will very likely result in an imposition of a fine, among other things, in order to deter future unfair competitive acts in the State of California. The impact will not only be on these direct suppliers but the use of non genuine IT anywhere in the value chain , even by the suppilers’ supplier , is likely to be included in the jurisdiction and it will have a huge impact on the Indian manufacturing scenario where majority of work is done with the help of small fabricators. Hence the Indian exporter of textile goods will need to take much more precautions at the stage of procurement of raw material from the domestic market or from other exporting countries.

According to Col. Christopher , CEO , RB knits export , “ this will be a good move as use of non genuine IT products not only destabilises the market conditions but is also instrumental in destroying the instinct for innovation in a society. Use of genuine IT products will help in promotion of a culture of innovation by giving due regard to the intellectual property rights of the creator. He strongly feels that the use of counterfeit IT products should be avoided and the benefits from the use of genuine IT products will far outweigh the short term gains received by using pirated software”.

Under such scenario, it makes sense for the Indian companies to move towards usage of genuine IT products as it is a fact that using stolen IT links companies directly to illegal economic activity, unfair profit, and it also puts businesses at risk by exposing them to lawsuits. It is in the interest of the Indian manufacturers to ensure that not only they themselves but their supply chain is also using legal IT. This will more appropriately help in strengthening their position as the preferred suppliers to the US in the longer run and will bring multiple benefits to the exporter as well as the company.

Essential measures for manufacturing organizations:
  • Internal Review: Manufacturers need to make sure that the appropriate licences have been obtained for any Information technology tools being used in the organization. The implementation of Basic Software Asset Management Guidelines can be of great help to the manufacturers in reducing the risk.
  • Compliance Certificate: Various third parties are involved in the process of providing compliance certification for usage opf licensed Information technology which can be utilized for the assurance purpose. 
  • CSS (O) Certification: The Business Software Alliance (BSA), a non-profit association of software publishers has launched the CSS(O) – ‘Certified in Standards Based SAM for Organizations’ certification, which certifies an organization’s internal SAM processes vis-à-vis the ISO 19771 SAM standard. Organizations can undergo this audit through BSA and receive the certification, which is valid for two years. 
  • Licensed Management Registry 360 (LMR360): This is an online software license management registry created by BSA. It allows companies to log their software inventory and compare it against their license rights. 
 

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